CONCEPCION HOLY CROSS COLLEGE INC.

Minane, Concepcion, Tarlac

PROFELEC1- UPDATES IN FINANCIAL REPORTING STANDARDS

Midterm Examination
1 Semester AY 2022 – 2023
st

Name: ________________________________________ Score: __________________

Class Schedule: ________________________________ Course/Year/Section: ______
Instructor: KRIST MARK Q. MACAPUGAY, MBA, CAT, RCA, MICB, CTT, CTB, CB Date: ___________________

I. MULTIPLE CHOICES: USE THE ANSWER SHEET PROVIDED IN ANSWERING THE ITEMS. ONLY
ONE ANSWER PER NUMBER IS VALID. (80 pts.)

1. Currency (cash) is a financial asset. Why?

a.) Because it represents the medium of exchange andis therefore the basis on which all
transactions are measured and recognized in financial statements.
b.) Because it represents the contractual right of the depositor to obtain cash from the
institution or to draw a check or similar instrument against thebalance in favor of a
creditor in payment of afinancial liability.
c.) Both and b.
d.) Neither a nor b.
2. Which of the following may qualify as cash equivalents?
a. Investment in ordinary shares
b. Investment in share options
c. Investment in preference shares acquired within a short period of their maturity and with a
specified redemption date
d. None of these

3. The following data pertain to Jimmy Corporation onDec. 31, 2022:

Current account at Bangko Dito P1,800,000

Current account at Bangko Doon (100,000)
Payroll account at Bangko Dyan 500,000Foreign bank account
(in equivalent pesos) 800,000
Savings account in a closed bank 150,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from employees 10,000
Credit memo from a vendor for a
purchase return 20,000
Traveler’s check 50,000
Money order 30,000
Sinking fund 2,000,000
DAIF check of customer 15,000
Customer’s check dated 1/1/23 80,000
Time deposit – 30 days 200,000
 Money market placement (due 6/30/23) 500,000
Treasury bills, due 3/31/23
(purchased 12/31/22) 200,000Treasury bills, due 1/31/23
(purchased 2/1/22) 300,000
The total amount to be reported as cash and cashequivalents as of Dec. 31, 2022, is

a. P2,780,000 c. P3,780,000
b. P3,080,000 d. P3,580,000

4. The following information pertains to an entity’s cash account:

Cash balance, beginning P 880,000

Cash receipts from the sale of goods 8,000,000
Cash receipts from dividends and interest 80,000
Cash payments for interest 250,000
Cash payments to suppliers of goods 6,000,000
Cash payments to employees 800,000
Cash payments to acquire property, plant
and equipment 1,200,000
Cash receipts from sales of property, plant and equipment 280,000
Cash payments to acquire equity or debt instruments of other entities 520,000
Cash receipts from sales equity or debt instruments of other entities 430,000
Cash proceeds from issuing shares 1,600,000
Cash payments to owners to redeem the entity’s shares 340,000
Cash proceeds from borrowings 2,100,000
Cash repayments of amounts borrowed 1,700,000

The entity’s cash balance at the end of the period is

a. P2,480,000
b. P2,650,000
c. P2,560,000
d. P2,840,000

5. An office supplies enterprise, operating on a calendar- year basis, has the following data in its
accounting records:
6. Which of the following is not a basic characteristic of asystem of cash control?

a. Use of a voucher system

b. Segregated responsibility for handling andrecording cash
b. Internal audits at irregular intervals
c. Weekly deposit of all cash received

7. Important elements of an internal control system for cash disbursements include each of the
following except:

a. Only authorized personnel should sign checks.

b. All expenditures should be authorized before acheck is prepared.
c. All disbursements, other than very smalldisbursements, should be made
by check.
d. The same person that prepares the check shouldalso record it to the proper journal.

8. Which statement is incorrect regarding presentation and disclosure of cash and cash
equivalents?

9. The cash receipt’s function should be separated from the related record keeping in an
organization to

a. Physically safeguard the cash receipts.

b. Establish accountability when the cash is first received.
c. Prevent paying cash disbursements from cash receipts.
d. Minimize undetected misappropriations of cash receipts.
10. The Ingersoll Co.’s ledger showed a balance in its cash account at Dec. 31, 2022, of P341,125
which was determined to consist of the following:

11. JAM Corporation had the following transactions in its first year of operations

12. FIGHT Corp. provided the following information on selected transactions during the current year:

13. Sales, P102,000; Cost of goods sold, P40,000; Wages, P31,800; Purchase of land, P8,000; Increase
 in accounts receivable, P3,600; Depreciation expense, P4,000; Gain on sale of equipment, P1,400;
Issuance of bonds, P16,000 at face value; Increase in accounts payable, P5,200; Patent
amortization expense, P2,600; Decrease in inventory, P2,000; Loss on sale of land P1,000;
Decrease in wages payable, P600; Declaration and payment of dividend, P6,800
.

14. The following item would not appear in a cash flow statement

a. Receipts of cash from customers

b. Conversion of preference shares to ordinary shares

c. Payment of creditors

d. Proceeds on disposal of non-current assets

15. Which of the following is a correct computation of cash flows from operation using the indirect
method?

16. Cash inflows from investing result from

a. Decreases in liabilities.

b. Increases in liabilities.

c. Decreases in noncurrent assets.

d. Increases in noncurrent assets

17. Using the indirect method, cash flows from operating activities would be increased by which of the
following?

a. Gain on sale of investments

b. Increase in prepaid expenses

c. Decrease in accounts payable

d. Decrease in accounts receivable

21. In the absence of a PFRS that specifically applies to a transaction, other event or condition,
management shall use its judgment in developing and applying an accounting policy that results in
information that is relevant to the economic decision-making needs of users and reliable. In making this
judgment, which of the following shall be considered as the most authoritative source?

22. When an entity makes a voluntary change to its accounting policies that has an effect on the current
period, it is required to disclose:

23. When an entity has not applied a new PFRS that has been issued but is not yet effective, the entity
shall

24. Prior period errors include all of the following, except

25. A change in accounting estimate is accounted for by

26. These are events that are indicative of conditios that arose after the repofting period?

a. Events after the reporting period

b. non- adjusting events

c. adjusying events

d. all of these

27. According to PAS 10, non- adjusting events after the reporting period

a. requires adjustmenrs of amounts in the financial statements

b. do no require adjustmenrs of amounts in the financial statements but are disclosed in the notes

c. do nit require adjustments or amounts in the financial statements but are disclosed in the notes if thet
are material

d. are ignored

28. In accordance with PAS 12, temporary differences are

29. Which of the following is an example of a temporary difference that could result in a deferred tax
asset?

30. A deferred tax liability shall be recognized for all taxable temporary differences, except to the extent
that the deferred tax liability arises from:

31. An entity reported the following information at year-end:

• Share investments of P1,000,000 that are very actively traded in the stock market.
• Government treasury bills of P2,000,000 with a 10-year term but purchased on December
31 atwhich time the bills had two months to go until maturity.
• Cash of P4,000,000 in the form of coin, currency, saving account and checking account.
• Commercial papers of P1,500,000 with term of nine months but purchased on December
31 atwhich time the papers had three months to go until maturity.
What total amount should be reported as cash
equivalents?
a. 7,500,000
b. 3,500,000
c. 8,500,000
d. 4,500,000
32. An entity reported the following ay year-end.

Cash on hand 500,000

Demand deposit 4,000,000
Three-month certificate of deposit 2,000,000
Postdated customer check 300,000
Traveler’s check 200,000
Manager’s check 100,000
Money order 150,000
What amount of should be reported as cash at year-end?

a. 6,950,000
b. 4,750,000
c. 6,750,000
d. 4,950,000

33. It is an adjustment of the carrying amount of an asset or a liability or the amount of the periodic
consumptionof an asset that results from the assessment of the present status and expected
future benefit and obligation associated with the asset and liability.

a. Change in accounting estimate

b. Change in accounting policy
c. Correction of a prior period error
d. Change in reporting entity

34. When an entity changes an accounting policy voluntarily, it has to

a. Inform shareholders prior to taking the decision.

b. Account for it retrospectively
c. Treat the effect of the change as an extraordinary item
d. Treat it prospectively

35. These are differences between the carrying an amount of an asset or liability and their tax bases.

a. Temporary differences
b. Timing differences
c. Permanent differences
d. Accounting differences

36. Which of the following will result in a deferred tax liability?

a. Excess of tax depreciation over accounting depreciation

b. Doubtful accounts on accounts receivable
c. Deferred revenue
d. Nontaxable dividend income received
37. Which of the following is an example of a permanent difference?

a. Revaluation surplus
b. Warranty cost
c. Tax penalties
d. Inventory obsolescence

38. Cash equivalents do not include

a. Money market instrument

b. Treasury bills
c. Held for trading equity investments
d. Commercial papers

39. Events after the end of reporting period are favorable or unfavorable events that occur between

a. The end of the reporting period and the date of the next annual financial statements.
b. The end of the reporting period and the date of the next interim or annual financial
statements.
c. The end of the reporting period and the date when the financial statements are
authorized for issue.
d. The end of reporting period and the date of the next interim financial statements.

40. All of the following can be classified as cash and cash equivalents, except

a. Redeemable preference shares acquired and due in 60 days

b. Commercial papers held and due for repayment in 90 days
c. Equity investments
d. A bank overdraft